BreadTalk

BreadTalk: Group is due to release its 4Q12 results this week, and OCBC anticipating another challenging set of results in terms of cost mgt. While there will be YoY improvements in terms of its top-line, a continued uptick in raw material costs and operating expenses should see operating profit and net profit decline by 6% and 9% YoY respectively. Despite the lack of a fundamental catalyst, the stock has continued its appreciation with an 11.8% gain on a YTD basis. From house review of the similar counters across the region, deem this increase to be down to a re-rating of the sector as investors clamour to gain exposure to EM-Asia consumer demand. Although raise rolling 12-month EPS multiple to 19x (11.1x previously) to reflect higher regional valuation, which increases fair value estimate to S$0.77 (from S$0.49) and upgrades rating to HOLD, continue to urge caution as house expect margin pressure to continue in the coming quarters.